BA resumes Tehran flights as investors eye Iran opportunities

With the lifting of sanctions and a diversification of Iran's economy, major companies including BASF and Orange, are eyeing up new opportunities in the country.

David Sapsted

1 September 2016

British Airways has resumed direct flights between London and Tehran for the first time in four years as links between Iran and the West continued to strengthen following the lifting of most sanctions at the beginning of the year.

$7bn of foreign investment approved

BA, which described Tehran as an "important" destination for the airline, will operate six flights a week, increasing to a daily service by year's end. It follows Air France's decision in the spring to restart a scheduled service from Paris after an eight-year gap."The Iranians have been extremely helpful in setting up this important new route and have been as keen as we are for the service to start," said a BA spokesman. "Tehran is an important destination for British Airways and we wanted to ensure that the service we offered met the highest standards our customers rightly expect of us from day one."In January, when sanctions started to be lifted, Philip Hammond, the UK's foreign secretary at the time, urged British companies to take advantage of the new opportunities that were opening up in Iran.

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Non-oil exports reach $19.1 billion

According to Seyed Hossein Mirshojaeean Hosseini, Iranian deputy minister of economic affairs and finance, Tehran approved plans for $7 billion of foreign investment during the first five months of this year, between $1.6-1.7 billion had already been invested.Mr Hosseini told reporters on Wednesday that, in the same period, Iran's non-oil exports had increased by 10.22 per cent over the same time last, to reach $19.1 billion.Although Iran is attempting to diversify its economy - with Orange and chemical giant BASF among the latest companies to eye major projects - the oil industry remains the essential growth asset. Though output has recovered substantially to about 3.85 million barrels per day, analysts say the industry still requires foreign investment and technical expertise to upgrade facilities.

Up to $50 billion a year of foreign investment

In October, there will be a fresh chance for international oil companies to enter the Iranian market when Tehran will invite them to submit bids under a long-awaited new contract model to bid to develop the South Azadegan field on Iran’s south-western border with Iraq.Ali Kardor, managing director of the National Iranian Oil Company, told the state news agency that the company expected to sign three contracts worth a total of $10 billion by March 2017. “We are calling for technical documents for a tender offer under the framework of the new oil contract model,” he said. “We will begin sending letters to international oil companies to inform them of the relevant issues next week.”Iran’s cabinet approved the new oil and natural gas contract model a month ago in the hope of attracting up to $50 billion a year in foreign investment. Major oil companies, including France’s Total and Italy's Eni, have expressed interest in the new round of contracts while Royal Dutch Shell, BP and Lukoil were reported in August to have reached an agreement to restart stalled investment in the region.Shell already has a production facility on the Iraqi side of the South Azadegan field, pumping 210,000 barrels a day. Current daily production from the field on the Iranian side is only 50,000 barrels.